Hoax of the ‘fiscal cliff’: How Pentagon feasts while jobless crisis drains budget

On the day that the country was supposed to fall over the “fiscal cliff,” Congress finally voted for a bill on taxes and other measures that kept the government solvent for another two months. The Obama administration claimed victory over the Republican right wing.

However, even the liberals in the Democratic Party camp couldn’t claim that the vote resolved anything. While the Bush tax cuts for the rich were allowed to expire on those earning more than $400,000, it’s dubious how much more they will really pay, since they can avail themselves of many tax shelters and dodges. And even with these small increases, the rich in the U.S. still will pay the lowest income and estate taxes in any industrialized country.

The struggle goes on, with the deadline for adopting a budget now being put off until March. By voting late in the evening of Jan. 1 on taxes, the two capitalist parties have made sure that the Pentagon’s huge slice of the pie — estimated to be more than half of all government discretionary spending when veterans’ benefits and war debts are factored in — remains intact and the bond markets wouldn’t spin out of control.

Workers, of course, are rightfully relieved that the deal included keeping their extended unemployment benefits. But the ruling class agreed to that not because they care about the workers, who they laid off, but because the unemployed spend every penny of that check right away, greasing the wheels of trade and commerce. That’s unlike the very rich, who squirrel their money away in tax-sheltered offshore accounts. Cutting off the meager incomes of many of the unemployed could send the economy into another nosedive, and the politicians on all sides know that.

It would also alienate more workers and push them in the direction of greater struggle.

Stealing from workers to pay for repression

The compromise on taxes only postpones the issue of the budget. In March, it will all come to a head again. There will be another “cliff,” with the most blatant lackeys of the super-rich saying that the government will grind to a halt unless major spending cuts are made.

Of course, they could just vote to raise the debt ceiling and the government could then go on borrowing money, as it has been doing for decades. But they’re threatening not to do that.

So in March the same pressure will be on to find ways to steal funds from Social Security, Medicare, Medicaid and other programs so vital to the masses, in order to pay for the real function of the capitalist state.

And what is the state’s real function? It is to protect the interests of the ruling class. In the U.S., this means having the most expensive military force in the world in order to defend global capitalists’ exploitation of resources and labor, from the Middle East to Africa, Asia, Latin America, wherever there are superprofits to be made.

And, on the domestic side, it means spending vast sums to run the world’s largest system of prisons, police, courts and the deliberately misnamed “homeland security” system. It takes lots of money to maintain a racist, anti-worker injustice system that controls 7.3 million men and women — who are behind bars, on probation or on parole. This system of mass incarceration is also a source of profit for the privately owned prison-industrial complex, but the financial burden of the system remains on the state. Millionaires profit from it, but workers’ taxes have to pay for it.

Repression is the basic function of the capitalist state, as explained by Marx and Lenin. The state enforces the rule of a very tiny minority of people, the capitalist class, over the vast majority, the working class.

And today, these workers increasingly cannot find work, not just here but all over the capitalist world. So the budget crisis is an inevitable outcome of this era of jobless recovery, when the ability of capitalism to expand has come to a dead end.

The budget crisis can only be understood in this context.

Jobless capitalism behind budget crisis

This ongoing, unsolvable unemployment crisis flows directly from the current stage of capitalism. Technology has replaced workers to an unprecedented degree. It has globalized the labor market as never before. So in this country alone, tens of millions are either unemployed or underemployed.

This drains the government Treasury. Fewer people working on the books means fewer taxes coming in — whether income taxes, payroll taxes or sales taxes.

This can be felt at all levels of government. Cities like Detroit, Baltimore, Chicago, which were formerly vibrant centers of industry, are in crisis. States, counties, villages are cutting back services and laying off workers. The U.S. Postal Service, which goes back to the 19th century, is under attack, with branch offices shutting down and workers eliminated.

Now comes the next step: putting on the chopping block huge federal programs like Social Security, Medicare and Medicaid. They are a prime target of the budget-cutters because that’s where the money is — since the ruling class won’t consider any meaningful cuts to the bloated military, the police/prison systems or the huge interest payments made to the banks. This interest reflects past deficits — mostly related, again, to the huge military budget.

The money deducted from workers’ wages for Social Security and Medicare is called “payroll taxes” and is meant to provide income security and health coverage in workers’ old age. In fact, this money is nothing more than deferred wages.

At the beginning of 2011, to counteract the recessionary effects of high unemployment, Congress passed a law that lowered the payroll tax by 2 percent in 2011 and 2012, adding an average of $1,000 to take-home pay for those years. It also reduced the moneys going into the Social Security fund at a time when it was under attack. In the deal signed this Jan. 1, the Social Security tax was returned to its original 6.2 percent rate, meaning that workers’ after-tax wages this year will be about $1,000 lower than last. That loss will be felt keenly in the working class. There’s no comparison with the few luxuries the rich might have to forego.

Whatever the plans of the bosses regarding cuts to Social Security and Medicare, they have to take into consideration that workers’ consciousness is changing as a result of the economic crisis. There is great anger among the people at the 1%, the hugely rich who grow even richer while workers are impoverished and youth have no futures. And polls show the people don’t want trillions spent on wars that enrich only the energy companies, the military-industrial complex and the banks.

This is where the ingenuity of capitalist democracy kicks in. This is what the two-party system is for — to dominate the discourse, frame the arguments and conceal what is really happening from the workers.

An across-the-board cut in all federal spending was mandated to begin on Jan. 1 if no budget deal was reached. It would have included the Pentagon along with all other departments.

But did anyone really believe they would cut the Pentagon? Didn’t we all know that both capitalist parties wouldn’t let that happen?

Of course, they had a contingency plan — one that both parties hoped would make them look good.

The Democrats succeed in having more appeal to the masses than the Republicans — the November vote reaffirmed that. The Democratic Party won the popular vote by a clear majority at all levels — for the presidency, the Senate and even the House. Although, taken altogether, Democrats running for the House got half a million more votes than Republicans, the widespread gerrymandering of election districts allowed the Republicans to maintain a majority of the House seats. It was a crooked election — but legal under U.S. law.

Having a divided Congress, however, is actually a convenient arrangement for both parties. It allows them to blame the other for all the problems and makes it seem that concessions are a necessary part of the process. If no concessions and no compromise, boom, you will fall over the cliff.

There is no cliff — it’s a phony crisis, as even capitalist liberals are pointing out. But they blame it solely on the Republicans for refusing (as of now) to raise the government’s debt ceiling or raise more in taxes from the rich. They leave out entirely a critique of the capitalist system, and they reduce it merely to a problem of government policy.

That’s like saying that a person who dies at 110 years of age did so because of this or that wrong medicine or procedure. No, the person died because his or her body was worn out. Any palliative measures would only have prolonged the dying.

Capitalism is a dying system — but one that still has enormous destructive power. Its once progressive side, the rapid development of the means of production under private ownership, has turned into an enormous obstacle to further human development and even to life on our planet.

The budget crisis in the U.S. is but one symptom of this, but one that rivets the workers’ attention because it so clearly impacts their lives in so many ways.

We need to get out our revolutionary message to them: Compromising with this or that capitalist party is no answer.

The most realistic and meaningful thing anyone can do right now is work to build an independent, fighting movement for complete social change, based in the class struggle of the workers and allied with all the most oppressed. This is the only way to break the grip of the capitalist class and restructure society on a planned, socialist basis, which will not just put a bandaid on poverty, racism and imperialist war, but can and will eliminate these evils entirely.

This is adapted from a talk given by WW Editor Deirdre Griswold to a public forum sponsored by the New York Branch of Workers World Party on Jan. 4.